Scheduled banks further cut rate of interest on their deposit products in July due to an increasing trend in excess liquidity in the banking sector, according to the latest Bangladesh Bank data. The BB data showed the weighted average interest rate on the deposit in the banking sector declined to 7.71 percentage points in July from 7.79 percentage points in June this year.
The weighted average interest rate on the deposit was 8.01 percentage points in May.
The BB data, however, showed that the weighted average interest rate on the lending also declined to 12.84 percentage points in July from 13.10 percentage points in June.
The weighted average interest rate on the lending was13.23 percentage points in May.
Against the backdrop, the interest spread rate, the gap between the interest rates on credit and deposit, declined to 5.13 percentage points in July from 5.31 percentage points in June.
A BB official told New Age on Monday that the interest spread rate had declined in July, but it was still high as the central bank had earlier asked the banks to maintain the limit below five percentage points.
The central bank has recently asked the banks at a bankers’ meeting to cut their rate of interest on their industrial credit for the interest of entrepreneurs.
The BB official said that the majority of the banks had recently cut their interest rates on deposits as they were now reluctant to collect funds due to a lower credit disbursement amid political uncertainty.
The business community has adopted a ‘wait and see’ approach to expansion of their business by taking loans from the banks due to political uncertainty.
The political uncertainty has put an adverse impact on the private sector credit growth.
The year-on-year credit growth rate in the private sector stood at 12.27 per cent in the recently concluded financial year against the central bank target of 16.50 per cent.
For this reason, the BB set a lower private sector credit growth of 14 per cent in its monetary programme for June-December 2014.
The BB official said that the excess liquidity excluding the statutory liquidity ratio in the banking sector had recently crossed Tk 1,20,000 crore.
The BB data showed that the weighted average rate on deposit in the state-owned commercial banks stood at 7.23 percentage points in July from 7.26 percentage points in June, that in specialised development banks at 9.31 percentage points from 9.39 percentage points, that in private commercial banks at 8.04 percentage points from 8.13 percentage points and that in foreign commercial banks at 4.34 percentage points from 4.49 percentage points.
The weighted average rate on lending in the state-owned commercial banks stood at 10.75 percentage points in July from 11.04 percentage points in June, that in specialised development banks at 12.29 percentage points from 13.11 percentage points, that in private commercial banks at 13.48 percentage points from 13.68 percentage points and that in foreign commercial banks at 12.32 percentage points from 12.45 percentage points.
-With New Age input
